By David Yong Oct. 16 (Bloomberg) -- Malaysia's ringgit fell to the lowest level since the start of 2007 on concern Asia's economic growth will slow as U.S. spending slumps. Government bonds rose. The currency weakened for a second day after the U.S. yesterday reported the biggest drop in retail sales in three years, fanning concern the world's biggest economy is headed for a recession. Asian shares tumbled after U.S. stocks fell the most since the 1987 crash. Malaysia may announce an ``economic stabilization plan'' on Oct. 20, the central bank said this week. ``The U.S. should already be in a recession and that will have an impact on Asian exports,'' said Ang Kok Heng, who manages $156 million as chief investment officer at Phillip Capital Management in Kuala Lumpur. ``Investors are making a 180-degree retreat'' from emerging-market assets, he said. The ringgit fell 0.4 percent to 3.5265 per dollar as of 4:53 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency touched 3.5295, the lowest level since Jan. 3, 2007. Economic growth is forecast to slow to 3.4 percent in 2009 from an estimated 5.3 percent this year, the Malaysian Institute of Economic Research said in Kuala Lumpur today. That would be the slowest expansion since 2001. ``It is likely that growth would deteriorate in late 2008 as the Malaysian economy takes the hit from the knock-on effects of a flagging global economy,'' the partially government-funded research institute said in a statement. The outlook for the global economy is ``increasingly dismal,'' the institute said. Recession Risk U.S. consumer purchases fell 1.2 percent in September, extending the decline to three straight months, the first time that's happened since comparable records began in 1992. Malaysia shipped 11 percent of its exports to the U.S. in the first eight months of this year, its largest market after Singapore. San Francisco Federal Reserve President Janet Yellen said yesterday the U.S. may already be in a recession. The Standard & Poor's 500 Index fell 9 percent yesterday and the Kuala Lumpur Composite Index slid 3.2 percent today. Ten-year government bonds gained for a second day on speculation investors will favor the safest assets. ``The worries have shifted from financial industry collapse to economic recession,'' said Phua Lee Kerk, who manages $34 million at Pheim Unit Trust Bhd. in Kuala Lumpur. ``In a scenario of slower corporate earnings, recession and interest- rate cuts, bonds will become more attractive.'' The yield on the 4.24 percent note due February 2018 fell 2 basis points to 4.17 percent, according to Bursa Malaysia Bhd. The price rose 0.10, or 1 ringgit per 1,000 ringgit face amount, to 100.50. A basis point is 0.01 percentage point. To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.

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